Once is not enough when it comes to Ford being profitable in Europe and the company is taking steps, including projected job cuts.
Executive Vice President Jim Farley, formerly the automaker’s marketing guru, told the media yesterday that the automaker’s profit in 2015 will be repeated again this year and beyond.
“Our plan’s about creating a vibrant and sustainable business,” said Farley, head of Ford’s Europe, Middle East and Africa regions, said in an interview. “Making $259 million in Europe last year was nice, but we’re just getting started.”
Ford not only reported a profit in Europe last year for the first time since 2011, but also grew sales 10%. The automaker made money after scaling down its operations on the continent: closing three plants, cutting employees and updating products.
Ford expects European sales will grow modestly with profit margins rising to 6-8%. However, to ensure that its operations on the continent are as efficient as possible, the automaker is offering “voluntary separations” packages to 10,000 salaried employees, expecting several hundred to accept them.
The company doesn’t plan to shutter any more plants or let any hourly employees go as part of its expected $200 million in savings in 2016; however, it doesn’t mean that it won’t find more ways to squeeze some improvements out of its facilities.
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Ford is operating at about 80% capacity and under new labor agreements will improve productivity and implement structural improvements in areas such as logistics and parts sequencing to assemble vehicles, engines and transmissions in less time.
The automaker will not remain profitable in Europe using cost-cutting measures alone.
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The automaker also plans to introduce seven new vehicles in the near term, including five new SUVs and crossovers in the next three years. Ford expects to sell more than 200,000 SUVs in 2016: a 30% jump compared with 2015.
(Click Here for details about Ford’s Mark Fields predicting profitability in Europe.)
Performance versions of the Focus and Fiesta, along with the Mustang, are part of the maker’s effort to keep in the black. Ford officials said it would sell more than 40,000 performance cars this year. The company is also expanding its luxury Vignale line-up, which will grow from one vehicle – the Mondeo Vignale – to five vehicles by the end of 2017.
Like most other automakers on the continent, Ford plans to expand its electric vehicle and hybrid offerings by 2020. Right now, it has the Focus EV as well as the Mondeo and CMax hybrids in Europe. Finally, the automaker will also cut less profitable vehicles, but officials declined to name what models are on the chopping block.
Farley confirm Ford’s plans to remain in Russia – something Ford CEO Mark Fields mentioned during the Detroit Auto Show last month – despite moves by other automakers to leave the market. Ford believes Russia is a 1.5-million vehicle market once the economy improves, and recently opened a new engine plant there.
(To see more about automakers’ concerns over crumbling BRICs, Click Here.)
“We think we’re very well positioned,” Farley said, according to the Detroit News. “Yes, we’re making a lot of adjustments on the ground, but we really feel this is critical for our European business.”